Emirates Airline Expects Drop In Annual Fuel Costs

Dubai’s Emirates Airline expects lower oil prices to translate into fuel savings in the financial year ending this month but is braced for foreign exchange hits in markets such as Europe, India and Russia, its chief operating officer said.

Adel Al Redha did not put a figure on the fuel costs but said their proportion of the company’s total costs was expected to fall to 35-37 per cent, from 42 per cent in the previous 12 months.

“There has been a direct reduction to operating costs with the reduction of fuel price,” he told reporters at the sidelines of a border security conference in Dubai.

Jet fuel prices have tracked a steep drop in oil prices since June last year. The International Air Transport Association (IATA) has forecast a combined $25 billion in 2015 net profit for airlines, up from 19.9 billion estimated profit in 2014, mainly driven by lower fuel costs.

Airlines such as Qatar Airways have said they would pass on the lower cost to customers by cutting surcharges, while Emirates has said it will consider cutting surcharges but will aim to maintain margins needed for investment in expansion and to meet profit targets.

Not all of the cost reduction will filter through to the bottom line because currency drops have hit revenue in some regions.

Emirates has taken foreign exchange hits in regions as Russia, India and Europe, and they have reduced some local profit margins by up to half, Redha said.

The COO also said that both Boeing and Airbus had made design improvements to their respective twin-aisle aircraft, 787 and A350, in response to requests by Emirates.

The carrier is looking at an order for around 50 to 70 twin-aisle 787 or A350 aircraft, its president said last week, after cancelling an order for 70 A350 aircraft last year, saying the new plane from Airbus did not fit its original specifications.

“The aircraft specifications have been revised to give it a better range… some of the (interior) specifications on both aircraft have been changed to reduce the weight of the aircraft,” Redha said. “We are looking at them for some of our current routes and some new routes.”

Redha did not give a timeframe for when a decision will be made as the airline continues to review the improvements, made specifically for the carrier’s orders.